Monday, January 14, 2013

Last year, SEC drafted a ruling on limiting foreign ownership of Philippine companies to 40% of all shares, including common, preferred, preferred voting, etc. This challenged the confidence on the companies affected by the ruling and their stocks fell / under-performed.

Companies affected by the ruling are PLDT (TEL), Globe Telecoms (GLO), Manila Water (MWC), Ayala Land (ALI) and ICT.

Last Friday, Jan. 11, a positive hint on SEC ruling was disclosed. SEC received an entry of judgement or clarification from the supreme court (SC) that the 40% rule must apply only to voting share. This hint of hope was seen on the stock market last Friday where TEL gained almost 2%, other stocks affected by the SEC ruling also increased in price which helped

Many investors are happy with the development, and even if the rules are not yet finalized, we're already seeing its positive effect on the stock market. We'll probably see more gains on the aforementioned stocks when the ruling is finalized on June 2013 (Tentative)

Even though SDA is less profitable than Bonds or SDA, it has an advantage over other investment vehicles:

It is relatively liquid. SDA may be terminated on a monthly basis if you want to, you just go to your bank and inform them you don't want to enroll your money in SDA.

Virtually risk-free, or okay, low risk. It is backed up by Bangko Sentral ng Pilipinas. If it defaults, then our country in general is going down.

Higher interest rate than your savings. A bank savings account has an average of 0.5% (exclusive of tax), SDA has ~2+%, even higher than some time deposit account.

Compounded. Since it's renewed monthly, your principal + profit is enrolled next so it earns more as months go by.

Alternative to SDA

Now the question is, if you didn't meet 500K worth of savings, where should you put your money?

For this, I find BPI Maxi Saver to be the next best thing, actually in some areas it's even better than SDA.

If you apply through BPI Direct, BPI Maxi Saver needs a minimum of 25K PhP. It doesn't have lock-up / holding period, you can use it like a normal savings account. You'll have an ATM, you can withdraw anytime and you can also terminate your account anytime should you decide to do so.

Interest Rates:
25,000 - 299,999 = 1.250%
300,000 - 499,999 = 1.375%

500,000 - 999,999 = 1.5%
1,000,000 and up = 1.625%

That alone is already way better than your average savings account. But like all infomercials, it doesn't end there! There's more! If you don't withdraw your money within the month, you'll earn a bonus of 1%. The additional 1% is still on a per annum basis.

Interest is credited to your account on a monthly basis, if my understanding is correct, there's also a power of compounding in this case.

Let's try a sample computation. Disclaimer, this may not be accurate yet.

Notice that the profit you earn from interest is greater in latter months. This is the power of compound interest. Here, it may not seem that much. Between 1st and 2nd month, the difference is measly 0.225 centavos but that's because the principal is relatively small.

Let's compare it to a savings account with an interest rate of 0.375% that is credited to your account on a quarterly basis, this is usually how a normal savings account goes:

Initial deposit to a savings account: P100,000

After 1st quarter / 3months:

Computation: P100,000 x 0.00375 / 4 = 93.75 minus 20% tax = P75

That's equivalent to P25 on the first month in a savings account as compared to P150 pesos in a Maxi-Saver account.

There are also other similar accounts offered by other banks such as BDO, but I found BPI to have the best offer as of writing.

I enrolled a Maxi Saver account 3 days ago via BPI Direct but BPI hasn't got back to me yet. I'll update this blog once I learn more about Maxi Saver from personal experience. Happy investing!

If you put money in your FAMI mutual funds on a monthly basis like I do, it will become harder to monitor them. I was wrong to think that the monitoring can be done in Metrobank Direct. This system of Metrobank is not user-friendly, I know investment is a separate entity from the bank, but from a normal person's point of view, they're all Metrobank!

Personally, I keep a spreadsheet of my funds where I record each time I receive the acknowledgement receipt how many shares I've bought and at what cost, then I input formula to automate the computations. It's a fun exercise actually, but it's also quite convenient to have an online monitoring for my FAMI account.

Good news is if you opened a stock trading in account in First Metro securities (FMSBC), you can also monitor your FAMI Mutual funds there. I have a Save and Learn Equity Fund (SALEF) and Save and Learn Fixed Income Fund (SALFIF).

Instructions in Linking your FAMI and First Metro Account:

1. Login to your First Metro Sec account. Go to Forms and click "Link FAMI Account to FirstMetroSec". You can also directly download the form here for convenience.

After you have downloaded the form, you then print it and and fill it up.

To get your FAMI Account Code, look at one of your FAMI acknowledgement receipts. It is placed at the upper right corner with the label "Acct. Code".

That's it. Wait for a few business days and you'll see your FAMI accounts in your FMSBC online account. You can check the "FAMI" link in your First Metro Sec account after a day or two to see if your account has been linked.